A cross section of small to medium scale businesses in Harare have effectively re-dollarized in the wake of a very unstable Zimbabwean dollar that has been oscillating intensively in recent weeks, 263Chat Business can report.
Last week, the Zimbabwean dollar (ZWL) capitulated close to 30 percent to trade at ZWL$ 22 against the United States Dollar only to close the week firmer at ZWL$ 14.
The development has left many traders in a catch-22 situation, as they risk massive losses by selling in the local currency under the current economic uncertainties.
“Last week we replenished stocks from suppliers who were using a rate of ZWL$ 22 against the US dollar an guess what happens after that, the exchange rate tumbles are we are now forced to sell our stuff at a lesser selling price because the rate is now down to ZWL$ 14. We will end up closing shops this is why we are resorting to USD,” Tawanda Karidza, who sells cellphone accessories in Harare, told this publication.
Government abolished the multi-currency system in June this year marking the beginning of a mono-currency regime anchored by the ZWL.
However, since then, the currency has been on devaluation course, with last week’s tumbling pressing the panic button in the market.
“Prices are going up almost on a daily basis in our RTGS dollars and it’s hard for us to keep chasing the exchange rate. With the USD we are more focused on our businesses and we can plan for the long term,” weighed in, another entrepreneur selling television sets at Gulf Complex.
Some businesses closed shop last Thursday and Friday as the exchange rate plunged beyond the ZWL$ 20 mark against the USD.
The move is expected to be a drawback to Minister of Finance and Economic Development, Mthuli Ncube’s economic strategy, the Transitional Stabilization Program that is primarily premised around creating a stable local currency to revamp the economy.
The Minister insists having the local currency is the best narrative for the economy.
“The introduction of the Zimbabwean dollar was long overdue in this economy but unfortunately it was done without proper supporting levers in place to sustain it. Naturally, the USD under these circumstances would remain a stock of value and a unit of reference for pricing,” economic analyst, Pepukai Chivore said.
Market watchers have however warned of total re-dollarization by year end if proper measures are not put in place to restore some semblance of stability to the ZWL.
This, they say will spelt out tumultuous effects on the economy already battling inadequate foreign currency reserves to sustain essential imports like electricity, medicines and fuel.